Working with a financial advisor is a crucial part of achieving financial success. It's essential to choose the right financial advisor that will best match your financial situation, needs, and goals. To do that, you have to ask the right questions. Here are 5 key questions to ask a financial advisor before you hire.
1. Are you a Fiduciary?
If you didn't know, we exist to educate people on the numerous benefits of fiduciary financial advice. This is one of the most important questions to ask a financial advisor.
The fiduciary standard means that the financial advisor is legally bound to put your needs above their own and ensures that all financial advice you receive is free from any conflicts of interest. That means your advisor isn't affiliated with other financial institutions, doesn't sell financial products, and doesn't make a commission.
2. What Services do You Offer?
Your financial situation is unique, and the services you need will likely differ from the norm. Understanding what services a financial advisor offers is important before you move forward.
Do they only focus on one specific area of financial planning? Or does the advisor provide a holistic approach? Based on our experience, we suggest working with an advisor or firm that offers the following services:
Retirement Strategies
Risk Management
Tax Planning
Estate Planning
Investment Management
Insurance Planning
The advisor will most likely offer services beyond this list. We believe these services are the basics of what a typical person will need.
3. How Do You Get Paid?
Fiduciary financial advisors may charge an hourly rate or a flat fee for advice and planning work they do. In some cases, advisors may even charge a percentage of assets under management (AUM) for managing your investment portfolio.
Some advisors may also receive commissions for selling certain investments or insurance products. We strongly recommend staying away from these types of advisors. Since they make money from selling your financial products, a conflict of interest will always exist.
4. How Often Do We Communicate?
Ask how the advisor communicates with their clients and how often. The frequency and type of communication you can expect to receive from the advisor are extremely important. If your advisor only calls you to schedule a yearly "check-up," something may be wrong. Every advisor is different, but at the end of the day, it's your money, and you should be satisfied with the level of service provided to you.
Depending on the complexity of your financial situation, or the news in the broader markets, we'd suggest working with a financial advisor that is responsive to your inquiries and willing to meet once a quarter.
5. What Experience do You Have?
Ask about the financial advisor's background and experience. They should be able to provide their professional qualifications, how long they've been in business, and what type of clients they typically work with upfront.
Use this information to judge whether you think the advisor will fit your situation well. Remember, your financial situation is unique and may require a more technical approach in a specific area.
It's also a good idea to check the financial advisors background for any disclosures. Things like complaints, regulatory actions, or criminal and civil proceedings. After all, it's YOUR money and you deserve the peace of mind knowing that your retirement nest egg is in safe hands.
It's Your Financial Journey
At the end of the day, these are your finances and deciding which advisor to work with will make a significant difference. These 5 questions to ask a financial advisor should help steer you in the right direction. If you want to find a fiduciary financial advisor near you, check out our our list of fiduciary networks.